Oil broadly steady after surprise US crude stock drop

© Reuters. Model of Oil barrels are seen in front of rising stock graph in this illustration, July 24, 2022. REUTERS/Dado Ruvic/Illustration/file photo

By Paul Carsten

LONDON (Reuters) -Oil prices were broadly steady on Thursday, shored up by a surprise U.S. crude stock drop and the U.S. Federal Reserve sticking to its outlook on rate cuts for the year.

Brent crude futures for May were down 31 cents, or 0.4%, to $85.64 a barrel by 1213 GMT. They fell by 1.6% on Wednesday.

U.S. West Texas Intermediate futures for May were down 30 cents, or 0.4%, to $80.97 a barrel after a fall of about 1.8% in the previous session.

Crude inventories in the United States, the world’s biggest oil consumer, fell for a second week, the U.S. Energy Information Administration (EIA) reported on Wednesday.

Stockpiles unexpectedly declined by 2 million barrels to 445 million barrels in the week ended March 15, as exports rose and refiners continued to increase activity. Analysts polled by Reuters had expected a 13,000-barrel rise. [EIA/S]

“It seems that the bullish mantra is still intact, with yet another unexpected drawdown in U.S. crude inventories last week while market participants continue to price for the risks of further supply disruption on the Russia-Ukraine front, said Yeap Jun Rong, market strategist at IG.

Gasoline inventories fell for a seventh week, down 3.3 million barrels to 230.8 million, suggesting steady strong fuel demand. Oil refinery runs ramped up by 127,000 barrels per day and utilisation rates rose.

Investors also took heart from the U.S. central bank, which held interest rates in a range of 5.25% to 5.50% on Wednesday, but kept to an outlook for three rate cuts this year.

Lower rates could boost economic growth, in good news for oil sales.

Ukrainian attacks on Russian refineries also prompted investors to trade crude at higher prices, factoring in that the strikes could hit global petroleum supplies.

Ukrainian drones have targeted at least seven Russian refineries this month. The attacks have shut down 7%, or around 370,500 barrels per day, of Russian refining capacity, according to Reuters calculations.

Analysts say prolonged disruptions could force Russian producers to reduce supply if they are unable to export crude oil and face storage constraints.

Elsewhere, Germany’s economy was likely in recession in the first quarter of 2024 as weak consumption and anaemic industrial demand continue to push the recovery further into the future, the central bank said in a regular economic report on Thursday.

Also on Thursday, the Bank of England’s governor said Britain’s economy is “moving in the right direction” for the central bank to start cutting interest rates.